Consolidated Financial Report of PEIXIN International ... · Full-servo Control Elastic Laminited...

Consolidated Financial Report

of PEIXIN International Group N.V.

for the period of three months

ended 30 September 2015

3Q 2015

PEIXIN International Group N.V. - consolidated financial statements 3Q 2015 all data in thousand EUR, unless stated otherwise

Contents

1. General information about the Group ................................................ 4

1.1 The Group structure .................................................................................................... 4

1.2 Changes in the composition of the Group .................................................................. 5

1.3 Business and products description .............................................................................. 5

1.4 Market overview ........................................................................................................... 9

2. Selected financial data ........................................................................ 10

2.1 Operating and financial review ................................................................................. 11

2.1.1 Key financial charts ......................................................................................................................11

2.2 Profit & loss account .................................................................................................. 13

2.2.1 Revenues .......................................................................................................................................13

2.2.2 Cost of Goods Sold .......................................................................................................................14

2.2.3 Gross profit ...................................................................................................................................15

2.3 Key factors affecting operating and financial results ............................................. 15

2.3.1 Unusual items, one-off events ......................................................................................................15

2.3.2 Important events and transactions that took place during the period and their consequences for

the financial position of the Group if they are significant ............................................................................15

2.3.3 Seasonality ....................................................................................................................................15

2.3.4 Events after the end of the period that have not been reflected in the financial statements for the

period /material subsequent events/ ..............................................................................................................16

2.3.5 Nature and amount of changes in estimates of amounts reported in prior interim periods of the

current financial year or changes in estimates of amounts reported in prior financial year .........................16

2.4 Risk factors .................................................................................................................. 16

2.4.1 Risk factors relating to the industry in which the Group operates ................................................16

2.4.2 Risk factors relating to the Group .................................................................................................17

2.5 Strategy ........................................................................................................................ 20

2.6 Significant investment CAPEX ................................................................................. 21

2.7 Dividend policy ........................................................................................................... 21

2.8 Shareholders and shares ............................................................................................ 22

2.8.1 Share capital structure ..................................................................................................................22

2.8.2 Major shareholders and shares......................................................................................................22

2.8.3 Issue of new shares .......................................................................................................................22

2.8.4 Changes in ownership of shares and rights to shares by Management Board members in the three

month ended 30 September 2015 and until the date of publication of the report .........................................22

PEIXIN International Group N.V. - consolidated financial report 3Q 2014 all data in thousand EUR, unless stated otherwise

3

2.8.5 Changes in ownership of shares and rights to shares by Supervisory Board members in the three

month ended 30 September 2015 and until the date of publication of the report ........................................23

2.8.6 Special rights to control over the Company .................................................................................23

2.9 Corporate bodies ........................................................................................................ 23

2.9.1 Management Board .......................................................................................................................23

2.9.2 Supervisory Board ........................................................................................................................23

3. Other information ............................................................................... 24

3.1 Environmental matters .............................................................................................. 24

4. Statement of the Management Board ................................................ 25

CONSOLIDATED FINANCIAL STATEMENTS .................................. 26


4

1. General information about the Group

1.1 The Group structure

As of the reporting date i.e. 30 September 2015 the Group was comprised of the parent company Peixin

International Group N.V. (registered under the Dutch law with its seat in Amsterdam) and four subsidiaries.

The Peixin International Group N.V. is the sole shareholder of Peixin International BVI, whereas Peixin

International BVI (Peixin International Group Ltd.) is a sole shareholder of three subsidiaries: Fujian Peixin

Machine Manufacture Industry Co. Ltd., Quanzhou Peixin Machine Manufacture Industry Co. Ltd. and Baixin

Industry Co. Ltd.

As at the date of the quarterly report, 80.77% of the Company’s share capital is held by P.I. Investment

Limited, wholly owned by the current CEO Mr Qiulin Xie.

The current structure of the Group, at the publication date of the quarterly report, is presented below.

PEIXIN International Group N.V. is the vehicle created for listing shares on the Warsaw Stock Exchange.

PEIXIN International Group N.V. is a public limited liability company (naamloze vennootschap) incorporated

under Dutch law by a notarial deed dated 2 July 2013. The Company has its statutory seat (statutaire zetel) in

Amsterdam, the Netherlands and its registered office at Joop Geesinkweg 901, 1114 AB Amsterdam, the

Netherlands. The Company is registered with the trade register of the Chamber of Commerce in Amsterdam,

under the number 58288449. The Company operates under the Dutch law.

Peixin International BVI (Peixin International Group Ltd.) is a limited liability company incorporated on

29 June 2004 under the laws of British Virgin Islands and registered in the Registrar of Companies under

number 602294. The registered office of Peixin International BVI is Akara Bldg., 24 De Castro Street,

Wickhams Cay I, Road Town, Tortola, British Virgin Islands. Peixin International BVI is a holding company.

As of the reporting date Peixin International BVI was a sole shareholder of the following three subsidiaries:

PEIXIN International Group N.V. (listing vehicle, the Netherlands)

PEIXIN International Group N.V. (listing vehicle, the Netherlands)

Peixin International Group Ltd. (British Virgin Islands)

Peixin International Group Ltd. (British Virgin Islands)

Fujian Peixin Machine Manufacture Industry Co. Ltd.

(China)

Fujian Peixin Machine Manufacture Industry Co. Ltd.

(China)

Quanzhou Peixin Machine Manufacture Industry Co. Ltd.

(China)

Quanzhou Peixin Machine Manufacture Industry Co. Ltd.

(China)

Baixin Industry Co. Ltd.

(China)

Baixin Industry Co. Ltd.

(China)

100%

100%

100%

100%

100%

100%

100%

100%


5

— Fujian Peixin, which scope of business includes manufacturing and selling of precision machinery

and equipment used for the production of various sanitary products,

Pictures above present insight into assembling workshop in Fujian

— Quanzhou Peixin has no operational activity. The company possesses certain land use rights, real

estates and trademarks. Formerly performed operating activities.

— Baixin Industry is a special purpose subsidiary established in connection with purchase land in

Yongchun county and investment in a new plant settled on this land. The sole shareholder of Baixin is

Peixin International BVI, direct subsidiary of the Company. The registered capital of the Baixin

amounts to five million euro and its registered office is Fujian Province, Yongchun city, Yongchun

county. Baixin’s scope of business is manufacturing including production of the general machines, as

well as hygienic products machines and the other machine in the other industry.

Fujian Peixin, Quanzhou Peixin and Baixin Industry are limited liability companies formed under PRC laws

with a status of wholly foreign owned enterprises.

1.2 Changes in the composition of the Group

During 3Q 2015 composition of the Peixin Group didn’t change.

1.3 Business and products description

The Group designs, produces and sells machines manufacturing daily-use hygiene products such as sanitary

napkins, diapers, facial tissues and other products. Depending on the type and functionalities of machines, they

can be divided for semi-automatic, fully-automatic, semi-servo or full-servo machines.

The Group believes that the key features of its products are high quality and functionality offered at

competitive prices. Due to technological development, the life cycle of the Group's products is approximately

five years, and follows the life cycle of end products because the design change of the end products and raw

materials used in its production require new technology and consequently new machines. This is the reason the

Company constantly improves their technology to meet the market demand, obtain and attract more and more

clients.

The pictures below present selected types of machines offered by the Group.


6

Diaper machines segment:

Full-servo Control Elastic Laminited Waistband Baby Diaper Production Line

Full-servo control full-function baby diaper line

Full-servo Control Pull-up Panty Production Line


7

Full-servo Control Elastic Laminited Waistband Baby Diaper Production Line

Sanitary napkin machines segment:

Automatic Folding Napkin Paper Machine

Semi-automatic Sanitary Napkin Production Line


8

Tissue machine segment:

Semi-servo Pets Pad Line

As of the 30 September 2015, the Group offered over 40 models of machines.

The main models are the Full-servo Control Elastic Laminited Waistband Baby Diaper Production Line, Full-

servo Control Pull-up Panty Production Line and Full servo Control Elastic Laminited Waistband Baby Diaper

Production Line respectively, which represent the new progress direction of the hygiene technology.

With nearly 20 years of manufacturing and design experience, the Group has gained a thorough understanding

of production technologies, client needs and valuable experience in distribution of products both in China and

abroad. The Group is one of the oldest Chinese manufacturers of machines producing daily-use hygiene

products and offers the most sophisticated products of this type such as full-servo machines. The Group has one

of the highest values of sales among domestic manufacturers of daily-use hygiene machines, according to the

Company’s estimates based on the publicly available data.

The Group sells its products under the “PEIXIN” brand. The Group's products are divided mainly into four

categories: Sanitary Napkin Machines, Diaper Machines, Facial Tissue Machines and Other machines.

The Group's business is mainly driven by the daily-use hygiene products market, currently experiencing growth

in developing countries. In particular, the market for diapers for babies and elderly people drives the diaper

machine market. Due to consistent improvement on the technology, the Group has the ability to produce more

sophisticated diaper machines. As the Group is dedicated to the design, functionality and quality of its products,

its technologies and products are getting closer to international competitors and exceed most of domestic

competitors. The increasing sales of the full servo machines are a vivid demonstration of how strong quality

and technology of the products gain on importance. During 2014 the Company commenced cooperation with

Automated Systems of Tacoma (AST). Subject of the cooperation with AST covers among others works on

new generation of baby diaper machine.

The Group will continue to distribute its products to daily-use hygiene product manufacturers in China and

abroad, mainly in Asia, Africa, East Europe and South America. However products covered by the cooperation

with AST will be distributed exclusively to the definite by the parties territory as Asia (including the Middle

East, but excluding India), Africa, Eastern Europe and Oceania (including, Australia, Melanesia, Micronesia

and Polynesia (excluding Hawaii).


9

1.4 Market overview

The Group’s business focuses on designing, researching, developing, manufacturing and selling precision

machines manufacturing daily-use hygiene products including sanitary napkins, disposable diapers, tissues and

other. The development of the machinery market is primarily driven by daily-use hygiene products market. The

level of demand on the hygiene products market in particular depends on economic and demography factors

such as level of income, consumption expenditure, population size and its structure as well as other like

consumption habits or preferences. Furthermore, depending on the market sector (e.g. sanitary napkins,

disposable diapers, tissues and other), the actual influence of particular drivers may vary.

Although Chinese economy grew at its slowest pace in 2015, the Group were able to increase cumulative

revenues for 1-3Q 2015 up to 51 437 thousands EUR compared to the 49 269 at the same period of 2014,

although in the same time the revenues for 3Q 2015 decreased by 1,2 thousands EUR compared to 3Q 2014.

Also net profit for 3Q 2015 decreased by ca. 44% compared to the same period of past year. The Company

expects that the declining economy situation in China may be continued.

According to Global Diaper Market Report 2014-2018 prepared by Kimberly-Clark, Svenska Cellulosa

Aktiebolaget, P&G & Unicharm Corp Dominates the Market, one of the major drivers in this market is the

increasing average disposable income among the population. There is a low level of volatility in the per capita

disposable income of the people. Moreover, the purchasing power of people has increased exponentially. The

affordability of diapers has grown in the developing countries, while there is a high penetration of diapers in the

developed nations. One of the major trends in the market is the increased R&D investments by the vendors. The

Global Diaper market is witnessing several innovations for the improvement of the performance and the

efficiency of diapers. The investments are aimed to enhance the bio-degradability of the product and its safety

for usage. The designing of diapers as well as the usage of improved and beltless technology are the focus of

the R&D investments. Also, investments are made by the vendors for protection of their brands and to prevent

infringement of copyright by other low-cost producers. Thus, the market is expected to experience increased

R&D expenditure by the vendors to develop a sustainable competitive advantage. Further, the report states that

one of the major challenges in this market is the declining birth rates in the developed markets. The decline

occurred during the great recession, when there was high unemployment, which discouraged people to expand

their families*.

Simultaneously, a new report by Allied Market Research titled, "Global Baby Diapers Market (Product Types

and geography) - Size, Share, Global Trends, Company Profiles, Demand, Insights, Analysis, Research, Report,

Opportunities, Segmentation and Forecast, 2013 - 2020", forecast that the global baby diapers' market would

reach $59.4 billion by 2020. Overall, disposable diapers segment garnered about 66% market share in the baby

diapers' market owing to unique features such as ultra-absorbency, range of ergonomic shapes and sizes. The

environmentally friendly and re-usability features of 'cloth diapers' would propel the baby diapers' market and

these features eventually would lead to substantial market growth during the forecast period (as opposed to

other segments). Most of the leading market players are focusing on sophisticated marketing programs and

aggressive market expansion strategies, thus increasing suppliers' businesses. Geographically, increasing

purchasing power, growing awareness and enhanced supply-side infrastructure in rural areas have influenced

the growth of the Asia Pacific regional diapers' market**.

*source: http://www.reuters.com

** source: http://www.prnewswire.com


10

2. Selected financial data

‘000 EUR 3Q 2014 3Q 2015 1-3Q 2014 1-3Q 2015

revenues 17 705 16 487 49 269 51 437

gross profit 6 502 4 955 18 345 16 467

operating profit 5 265 2 689 14 983 10 776

EBITDA 5 752 3 186 16 580 12 382

profit before tax 5 175 2 972 14 852 11 118

net profit 4 364 2 426 12 568 9 567

‘000 EUR 31 Dec 2014 30 Sept 2015

non-current assets 35,647 40 039

current assets 35,892 51 624

total assets 71,539 91 663

long-term liabilities - -

short-term liabilities 7,757 10 573

total equity 63,782 81 090

paid-in capital 13,000 13 000


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2.1 Operating and financial review

2.1.1 Key financial charts

Sales ’000 EUR

Gross Profit ’000 EUR

EBITDA ‘000 EUR

32 839

46 509

59 407

69 249

17 705 16 486

2011 2012 2013 2014 3Q 2014 3Q 2015

11 994

16 890

22 322

25 801

6 502 4 955

2011 2012 2013 2014 3Q 2014 3Q 2015

10 666

15 055

19 609 19 875

5 752

2 745

2011 2012 2013 2014 3Q 2014 3Q 2015


12

Net profit ‘000 EUR

Gross Profit Margin %

Net Margin %

8 195

11 369

15 772 16 823

4 364

2 426

2011 2012 2013 2014 3Q 2014 3Q 2015

36,5% 36,3% 37,6% 37,3% 36,7%

30,05%

2011 2012 2013 2014 3Q 2014 3Q 2015

25,0% 24,4% 26,5%

24,3% 24,7%

14,10%

2011 2012 2013 2014 3Q 2014 3Q 2015


13

2.2 Profit & loss account

2.2.1 Revenues

Revenues are generated from sales of sanitary napkin machines, diaper machines, facial tissue machines and

other paper machines.

Revenues decreased by EUR 1,218 thousand or -6.9%. from EUR 17,705 thousand for the three months ended

on 30 September 2014 to EUR 16,487 thousand for the three months ended on 30 September 2015. From the

other hand the Company was able to slightly increase cumulative value of revenues from EUR 49,269 thousand

in 1-3Q 2014 up to EUR 51,437 thousand in 1-3Q 2015 i.e by 4,4%

Revenues breakdown by segments

1-3Q 2014 1-3Q 2015 Change in

revenues

Unit ‘000

EUR Unit

‘000

EUR %

(unaudited)

Sanitary napkins machines 58 22 133 46 18 815 -14,99%

Diaper machines 43 19 449 48 22 814 17,30%

Facial tissue machines 423 5 761 403 7 045 22,29%

Other paper machines 74 1 926 67 2 762 43,41%

598 49 269 564 51 436 4,40%

Sales breakdown by segments for 1-3Q 2014 and 1-3Q 2015 is presented on charts below.

, PLEASE

COMPANY, PLEASE PROVIDE INFORMATION ON THE REASONS WHICH HAS

INFLUENCE ON THE REVENUES ACHIEVED 3Q2015.

sanitary napkins

machines 45 %

diaper machines

39 %

facial tissue machines

12 %

others 4 %

1-3Q 2014

sanitary napkins

machines 37 %

diaper machines

44 %

facial tissue machines

14 %

others 5 %

1-3Q 2015


14

Sales geographic breakdown

The Group distributes its products in China directly to its end users. The Group distributes its products

internationally (i) through China-based trading companies that sell the Group's products on to customers and

(ii) directly to international customers.

The following table presents the Group’s revenues and number of units sold broken down geographically for

the period of the 3Q 2014 and 3Q 2015.

3Q 2014 3Q 2015 Change 1-3Q 2014 1-3Q 2015 Change

‘000 EUR ‘000 EUR % ‘000 EUR ‘000 EUR %

Revenue:

Direct sales

-Mainland China 9 618 6439 -33,0% 31 328 21 206 47,7%

-Outside Mainland China 906 1631 80,0% 4 025 5 523 -27,1%

Sales to trading companies 7 181 8416 17,2% 13 916 24 707 -43,7%

Total 17 705 16486 -6,8% 49 269 51 436 -4,2%

Number of units sold

3Q 2014 3Q 2014 1-3Q 2014 1-3Q 2015

Direct sales

-Mainland China 151 334 348 493

-Outside Mainland China 4 5 52 69

Sales to trading companies 86 128 198 259

Total 241 467 598 821

LEASE PROVIDE DESCRIPTION CONCERNING SALES GEOGRAPHIC BREAKDOWN

IN 3Q 2015 INCLUDED REASONS OF INCREASED/DECREASED

2.2.2 Cost of Goods Sold

The following table presents the Group’s cost of sales.

1-3Q 2014 1-3Q 2015 Change

‘000 EUR ‘000 EUR %

(unaudited)

Changes in inventories of finished

goods and work in progress -2 770 -6 804 -145, 6%

Materials consumed in production 27 320 33 743 23,5%

-Glue machines and motors 9 073 10 858 19,7%

-Steel 6 274 8 528 35,9%

-Electric controllers 4 773 5 621 17,8%

-Knife roller\cylinder 1 105 1 353 22,4%

-Other components 5 089 6 158 21,0%

-Auxiliary materials 1 006 1 225 21,8%


15

Labour 2 794 2974 6,4%

Depreciation and amortization 969 1607 65,8%

Outsourced manufacturing cost 1 145 1308 14,2%

Taxes and surcharges * 325 542 66,8%

Water and electricity 402 475 18,2%

Others 230 123 -46,5%

Foreign currency translation difference 509 960 88,6%

Total 30 924 34928 12,9%

*Taxes and surcharges are mainly Urban Maintenance and Construction Tax (7% of Valued Added Tax payment amount), Extra Charges of Education

Fund (3% of Valued Added Tax payment amount) and Local Surcharge for Education Fund (2% of Valued Added Tax payment amount).

2.2.3 Gross profit

Gross profit decreased by EUR 1,547 thousand, or 23,8 %, from EUR 6 502 thousand in 3Q 2014 to EUR

4,955 thousand in 3Q 2015.

The following table presents the Group’s gross profit broken down by product categories.

3Q 2014 3Q 2015 change 1-3Q 2014 1-3Q 2015 change

‘000 EUR ‘000 EUR % ‘000 EUR ‘000 EUR %

(unaudited) (unaudited)

Segment gross profit

Sanitary napkins machines 2 802 1036 -63,0% 8 373 6 147 36,2%

Diaper machines 2 567 2478 -3,5% 7 226 7 048 2,5%

Facial tissue machines 774 843 8,9% 2 072 2 368 -12,5%

Other paper machines 359 598 66,6% 674 904 -25,4%

Total 6 502 4 955 -23,8% 18 345 16 467 11,4%

2.3 Key factors affecting operating and financial results

2.3.1 Unusual items, one-off events

Over the period ended 30 September 2015, there were no unusual items ore one-off events which affected the

Group’s operating and financial results.

2.3.2 Important events and transactions that took place during the period and their

consequences for the financial position of the Group if they are significant

Over the period ended 30 September 2015, no important events or transactions took place that are significant

for the financial position of the Group.

2.3.3 Seasonality

The Group’s business is slightly seasonal. The Group usually generates relatively less sales in the first quarter

due to the Chinese New Year and the factories closure for 2 weeks. However, slightly more sales are normally


16

generated in the fourth quarter of the year due to the fact that clients want products to be delivered by the end of

the year in order to start the business after the Chinese New Year holiday period.

2.3.4 Events after the end of the period that have not been reflected in the financial

statements for the period /material subsequent events/

There were no events after the end of period that have not been reflected in the financial statements or would

affect financial statements in any way.

2.3.5 Nature and amount of changes in estimates of amounts reported in prior

interim periods of the current financial year or changes in estimates of amounts

reported in prior financial year

The Company did not publish any estimates of amounts for the period ended 30 September 2015.

2.4 Risk factors

2.4.1 Risk factors relating to the industry in which the Group operates

The Group operates in a competitive environment. Increased competition or the entry of new competitors,

combined with any failure to compete effectively with its competitors, may result in lower margins or in a

loss of the Group's revenues.

The Group's business focuses on the manufacturing of precision machinery used for the production of sanitary

products including sanitary napkins, diapers and facial tissues.

An increase in competition and new competitors could arise at any time. In particular, due to the economic

slowdown and the results of the financial crisis in industrialised countries, the Group’s international

competitors may increase their sales activities in the markets of China and other growing economies. Existing

and new competitors may establish more advanced production facilities or have greater financial resources,

which could allow them to compete aggressively by lowering the prices of their products or expanding their

production capacity. To remain competitive, the Group must continue to invest significant resources in

increasing its production capacity, the on-going development of new products and improvement of existing

products, in particular. There can be no assurance that the Group will have sufficient resources to increase its

competitiveness or that such investments will improve the Group's position in relation to its competitors.

Increased competition or the arrival of new competitors could result in lower margins or a loss of revenues,

either of which could have a material adverse effect on the Group's business, financial condition, and operation

results.

Fluctuations in the supply and price of components and raw materials such as steel and alloy steel and other

steel-based components could result in increased costs that the Group may only be able to pass on to its

customers partially or not at all

As part of the Group’s operations, the Group must obtain sufficient quantities of components and raw materials,

most importantly steel and alloy steel, and steel-based components, at acceptable prices. Furthermore, steel and

alloy steel have been subject to substantial pricing cyclically. The Group cannot assure you that price

fluctuations of components and raw materials will not occur in the future or that the Group will be able to pass

on cost increases to its customers in part or entirely. Failure to pass on cost increases to its customers in part or

entirely could adversely affect the Group's business operations and financial results.


17

Availability of bank financing

The availability of bank financing for the Group in China is limited. Based on its knowledge of the market

practice, the Company believes that receiving bank borrowings without providing collateral in the form of

leasehold rights to the land or buildings may be very difficult if at all possible. Almost all of the Group’s land

and premises are pledged as of the date of hereby report. Consequently, the Group believes that it has a very

limited capacity to obtain further bank financing until it acquires new real estate which would be eligible to be

used as a pledge.

If the Group is unable to obtain further bank financing or alternative financing, this may have a material

adverse effect on the Group’s business, revenues, financial condition and results of operations.

2.4.2 Risk factors relating to the Group

The Group is exposed to fluctuations in foreign exchange rates. Fluctuations in currency exchange rates

could have material adverse effects on the business, financial condition and results of operations of the

Group.

Direct sales outside mainland China were realized by executing direct orders from international clients. It is the

only method for the Company to generate the foreign currency. In the next 3-5 years, the Group would like to

focus on direct international sales in order to benefit from potentially increasing margins and close the

relationship with the clients. Therefore, the revenue generated by foreign currency will be increasing.

Consequently, fluctuations in currency rates may influence the Group’s results of operations, especially when

the time between a sale of the Group’s products and receiving payment is significant and the currency rate

changes during this time.

Moreover, the Company’s competitive position may change as a result of unfavorable currency rate fluctuation.

The RMB appreciation may lead to higher prices for the Group’s products in overseas markets and may have an

adverse effect on the Company’s export sales.

As a result, fluctuations in currency exchange rates could have material adverse effects on the business,

financial condition and results of operations of the Group.

The inventory levels of raw materials, parts and components for the production of the Group's machines

may not be adequate and may expose the Group to additional costs or affect the Group's ability to

deliver products in a timely manner

Due to the nature of the Group's production process, the Group does not maintain ready-to-sell machines in its

inventory. The Group usually concludes one-year contracts with its suppliers to keep the Group's inventory

level of raw materials, parts and components that the Group purchases from suppliers to manufacture its

machines. Due to the planned increase in the production scale, occasional shortages in inventories may occur in

the future. If the level of raw materials, parts and components in the Group's inventory is insufficient, the

Group will need to purchase them from its suppliers at a price which may not always be satisfactory. This may

expose the Group to additional production costs. Moreover, if the Group's inventory level is too low and the

Group fails to purchase additional raw materials, parts or components in a timely manner, the Group may fail to

meet delivery deadlines and consequently may lose sales.

The operations of the Group are subject to uncertainties and contingencies beyond its control that could

result in material disruptions and adversely affect its results of operations. A material disruption of the


18

operations of the Group or the operations of its suppliers or customers due to force majeure events could

materially and adversely affect the results of operations

The operations of the Group are subject to uncertainties and contingencies beyond its control that could result

in material disruptions and adversely affect its results of operations. These include war, riot, public disorder,

civil commotion, fire, earthquake, flood and other natural calamities, epidemics, outbreaks of infectious

disease, terrorism, whether locally or nationwide, or incidents such as industrial accidents, equipment failures,

malfunctions of information systems or other operational problems, strikes or other labour difficulties and

disruptions of public infrastructure such as roads, ports or utilities. In addition, the Group's production

processes are power intensive and require a constant supply of electricity. Any failure in power generation

facilities, transmission systems and other infrastructure or a general scarcity of electricity could therefore also

result in a decline in production output or even a suspension of production.

Any such disruption of the Group’s operations could disrupt, limit or delay its production, prevent it from

meeting customer orders, increase its production costs or require it to spend additional capital expenditures,

each of which could materially and adversely affect its results of operations. Force majeure events may also

materially and adversely affect the operational performance of the Group's suppliers or customers, resulting in a

decreased demand for the Group's products in the relevant markets. In such event, the business, financial

condition and results of operations of the Group may be materially and adversely affected.

Delays in the Group’s delivery of products due to the failure to meet deadlines may have a negative

impact on the Group’s customer relationships and business reputation

The business of the Group is largely based on customer relationships. If the Group fails to deliver its products

in line with its deadlines, this may affect the Group’s relationships with its clients and the Group’s reputation.

In such event, the business, financial condition and results of operations of the Group may be materially and

adversely affected.

If the Group experiences a significant number of claims, including warranty claims, the Group’s costs

might increase substantially, and the Group's reputation and brand name could suffer

Typically, the Group sells its machines with warranty terms covering a period of one year after the sale, except

for certain parts of its machines, e.g. (belt, knives), that are not subject to warranty terms. The Group's product

warranty typically requires the Group to provide after-sales services that cover parts and labor for non-

maintenance repairs, except for repairs that are caused by operator abuse or improper use or negligence and are

not attributable to normal wear and tear. Repair and replacement of certain parts and components of the

Group’s machines, such as electrical apparatus control systems, are not covered by the Group but are covered

by the manufacturers of such parts and components. However, in the event that such third-party suppliers refuse

to perform their warranty obligations or to indemnify the Group for providing warranty services to customers to

repair such parts and components, the Group may incur additional warranty costs or incurred costs may not be

recovered.

If the Group experiences significant claims, including warranty claims, or if the Group's repair and replacement

costs associated with warranty claims increase significantly, the Group may incur greater costs. Moreover, an

increase in claims, including warranty claims, could affect its reputation and consequently result in a material

adverse effect, financial condition, results of operations and prospects.

Research and development efforts of the Group may not yield the expected benefits and the Group may

not be able to introduce successful products and maintain the competitiveness of its product offerings. If

the Group is unable to anticipate trends in technological or product development or follow the market


19

trends and rapidly develop the new and innovative technologies or products that are required by the

Group's customers, the Group may not be able to produce sufficiently advanced products at competitive

prices, which in turn may have a material and adverse impact on the Group's business, financial position

and results of operations.

The market for the Group's products is characterized by continuous technological developments and innovation

to provide better product performance and address the increasingly complex market needs. As a result, the

Group has been focusing on research and development activities, which require considerable human resources

and capital investments. However, the Group's research and development efforts may not be successful or yield

the anticipated level of economic benefit. In addition, even if the Group's research and development efforts are

successful, the Group may not be able to apply these newly developed technologies to products that will be

accepted by the market, or the Group may not be able to apply them in a timely manner to take advantage of

opportunities in the market. The level of economic benefit that can be derived from newly developed

technologies or products may also be affected by the ability and promptness of the Group's competitors to

replicate these technologies or products or develop more advanced or cheaper alternatives. If the Group's

technologies are replicated, replaced or made redundant, or if the demand for the Group's products is not as

anticipated, the Group's turnover associated with such technologies or products may not offset the costs that the

Group has incurred in developing such new technologies. Furthermore, if the Group is unable to anticipate

trends in technological or product development or follow the market trends and rapidly develop the new and

innovative technologies or products that are required by the Group's customers, the Group may not be able to

produce sufficiently advanced products at competitive prices, which in turn may have a material and adverse

impact on the Group's business, financial position and results of operations.

The Group revenue depends on effective sales through the distribution network and its expansion. The

Group cannot ensure that its selling efforts will be satisfactory and there can be no assurance that its

marketing and development efforts will not prove costly or ineffective. If the Group fails to expand or

develop its sales network as planned or if it loses its best performing salesmen, the Group may not be

able to meet its sales' targets, which may have a material and adverse impact on the Group's business,

financial position and results of operations.

As of end of 3Q 2015, the Group's distribution network consists of 29 salesmen operating mainly in coastal

areas of China and direct overseas market, which generate substantially all of the Group’s revenue.

Domestically, the Group intends to extend its distribution coverage from the current coastal areas of China to

other inland and economically growing regions. The Group also intends to intensively increase its direct

presence in selected overseas markets such as India, Turkey and USA by increasing promotional efforts such as

targeted advertising and participation in exhibitions to increase its ability to directly distribute its products to

international customers. Late 2013 the Group made a decision to establish first overseas office in Ankara,

Turkey. The office has been operational since January 2014. The Group cannot ensure that its selling efforts

will be satisfactory and there can be no assurance that its marketing and development efforts will not prove

costly or ineffective. Moreover, the Group may not be able to successfully deal with legal and regulatory

conditions in foreign countries that are different from those in China, what may impact its international

expansion. If the Group fails to expand or develop its sales network as planned or if it loses its best performing

salesmen, the Group may not be able to meet its sales' targets, which may have a material and adverse impact

on the Group's business, financial position and results of operations.

The Group may not be able to implement its strategy. Achieving the Group’s strategic objectives is

contingent upon a range of factors which are beyond the Group’s control, including, in particular,

market conditions and the general business and regulatory environment. The Group’s failure to


20

implement its strategic objectives may have a material adverse effect on the Group’s business, revenues,

financial condition and results of operations.

The Group’s strategic objectives are to extend sales in China, increase direct international coverage, strengthen

brand recognition, focus further on R&D and quality enhancing as well as further increase production

capacities (detailed information on strategy is included in the point 1.6 below).

Achieving these strategic objectives is contingent upon a range of factors which are beyond the Group’s

control, including, in particular, market conditions and the general business and regulatory environment.

Strategy implementation requires the Group to provide sufficient financing for its growth as well as to manage

its growth properly and integrate operation technologies, products and personnel. The Group can give no

assurance that its efforts will have the expected effect. In addition, the Group may incur substantial costs to

introduce new products from which the Group may be unable to ultimately realize significant revenues. If

revenues do not increase as a result of the introduction of such products, the costs associated therewith may

exceed revenue. The Group’s failure to implement its strategic objectives may have a material adverse effect on

the Group’s business, revenues, financial condition and results of operations.

The Group’s strategy assumes that the Group’s production capacity needs to be significantly increased to meet

the expected growing demand for its products. These assumptions are based on the Company’s best knowledge

and perception of the market trends, and its competitive position in the market. However, if the Company’s

assumptions concerning the machinery market and its competitive position are incorrect, or the market

develops contrary to the Company’s expectations, the assumed investment plan may prove overestimated and

the Company may not be able to fully utilize its increased production capacity. Furthermore, a failure to

implement the Group’s strategy may also prevent the production capacity from being fully utilized. In such

case, the costs and expenses borne by the Group to implement the overestimated investment plan may not

translate into an increase in the Group’s revenues.

Success of the Group depends in part on its ability to enhance its production capacity, which is subject to

risks and uncertainties. If the Group is unable to increase its production capacity, it may not be able to

achieve the desired level of production and revenues, which may have an adverse effect on the Group's

financial condition, results of operations and business.

The Group is planning to increase its production capacity, which is one of the factors on which the success of

the Group depends (detailed information on investment plan is included in the point 1.7 below).

The Group's ability and efforts to enhance its manufacturing capabilities are subject to significant risks and

uncertainties, including: the Group's ability to obtain funding and the Group's ability to obtain the required

approvals from relevant government authorities to acquire additional facilities.

If the Group is unable to increase its production capacity, it may not be able to achieve the desired level of

production and revenues, which may have an adverse effect on the Group's financial condition, results of

operations and business.

2.5 Strategy

The Group's objective is to maintain and further strengthen its position as a market leader among domestic

producers of daily-use hygiene product machines both in terms of revenue and quality. The Group also aims to

increase its international presence and increase its direct international sales. To achieve this, the Group intends

to implement the following goals:


21

- Extend sales in China to benefit from the expected growth in the daily-use hygiene product industry

there and expand its international coverage

- Establish international branches in the world’s developing regions (South Africa and Oceania), and

some already-developed markets (Turkey, Central and Eastern Europe)

- Strengthen brand recognition

- Further focus on R&D and quality enhancement , such as new generation of baby diaper machines

- Further increase production capacity

- Labor training and reserving for the coming production extension

2.6 Significant investment CAPEX

By the end of 30 September 2015 the Company did not receive from the local Chinese government any

settlements concerning new schedule of investment plan. According to the land purchase agreement described

in current report No. 11/2014 the Company is under the process of the investment in the new plant, nevertheless

because of delays in expenditures which supposed to be made by the local government into the infrastructure,

on a zone were the Company’s plot is located, like wiring installation, water-supply system, etc., the initial

investments planned by the Company had to be postponed. At the moment the Company conducts consultations

with the local government concerning modification of the investment schedule in the new plant, but the

consultations are not finalized yet. Taking into consideration foregoing pace in progress of the consultations

with the government, the Company doesn’t expect their finalization in this year. More detailed information was

disclosed by the Company in the current report No. 12/2015.

2.7 Dividend policy

On 11 May 2015, the Management Board of the Company decided to change Company’s dividend policy

disclose in the current report No. 13/2014, and in this same day the Management Board recommended to the

Annual General Meeting approving the financial statements for 2014 to allocate its consolidated net profit for

2014 for raising reserve capitals with the intention to finance investments. Recommendation of the

Management Board was approved by the Supervisory Board of the Company on 11 May 2015. Subsequently,

the Annual General Meeting held on 29 June 2015 decided to allocate its consolidated net profit for 2014 for

raising reserve capitals with the intention to finance investments.

Alteration of the dividend policy was caused among other things by the fact, that since cancellation of the SPO

the Company hasn’t raised significant external sources of funding yet.

Additionally the Company expects that the declining economy situation in China and overseas markets also

justifies abovementioned decision.

Simultaneously the Company informed, that in the remaining scope upholds dividend policy for subsequent

years, however the dividend policy will be reviewed periodically and payment of any future dividends will be

effectively made at the discretion of the Management Board and the Shareholders’ Meeting after taking into

account the Company’s earnings, cash flow, financial condition, capital investment requirements and other

factors.


22

2.8 Shareholders and shares

2.8.1 Share capital structure

As of 30 September 2015 the Company’s share capital consisted of 13,000,000 ordinary shares with a nominal

value of EUR 1 each.

The Company has an authorized share capital of EUR 50,000,000 consisting of 50,000,000 ordinary shares

with a nominal value EUR 1 of each.

2.8.2 Major shareholders and shares

As of 30 September 2015 the Company’s shareholding structure was as follows:

Shareholder number of shares % in the share

capital

P.I. Investment Limited (wholly owned by Mr Qiulin Xie) 10,500,000 80.77%

Xinsheng Investment Holding Ltd - fully controlled by Mr

Zhang Fan (Macau Resident) 600,000 4.62%

Jinyuan Investment Holding Ltd - fully controlled by Mr Li

Meiqing (HK Resident) 539,202 4.15%

others 1,360,798 10.47 %

Total 13,000,000 100%

Since publication of the report for 1Q 2015, as well as semi-annual report for the first half of 2015 there were

any changes in the Company’s major shareholders’ structure.

2.8.3 Issue of new shares

The Company’s share capital comprises 13,000,000 shares with a nominal value of EUR 1 each.

In 3Q 2015 the Company did not issue any debt securities nor made any repurchases or repayments of debt or

equity securities.

2.8.4 Changes in ownership of shares and rights to shares by Management Board

members in the three month ended 30 September 2015 and until the date of

publication of the report

At the date of publication of this quarterly report, to the best of the Company’s knowledge none of the

Management Board members, other than Mr. Xie, held directly Company’s shares or rights to shares.


23

2.8.5 Changes in ownership of shares and rights to shares by Supervisory Board

members in the three month ended 30 September 2015 and until the date of

publication of the report

To the best of the Company’s knowledge none of the Supervisory Board members held Company’s shares or

rights to shares in the three months ended 30 September 2015 and until the date of publication of this quarterly

report and there was no changes in their shareholding or the number of rights to shares.

2.8.6 Special rights to control over the Company

There are no Company’s shares that give special rights to control over the Company to shareholders.

2.9 Corporate bodies

The Company has a two-tier board structure consisting of a Management Board and a Supervisory Board. The

Management Board is the statutory executive body and is responsible for the day-to-day management of the

Company, including, amongst other things, formulating the Company's strategies and policies and setting and

achieving the Company's objectives. The Supervisory Board supervises and advises the Management Board. In

addition, Supervisory Board approval is required for certain important decisions of the Management Board.

2.9.1 Management Board

The Management Board members were appointed by the General Meeting on 9 September 2013 for a period of

four years, provided that the members of the Management Board retire periodically in accordance with a

rotation plan drawn up by the Supervisory Board.

As of 30 September 2015 Management Board was composed of the following members:

Name Age Position Member since Term End of term

Qiulin Xie 55 Chairman 2 July 2013 4 years the date of the annual

General Meeting in 2017

Zhimin Huang 36 Chief Financial Officer 29 June 2015 3 years the date of the annual


Kaida Xie 28 Sales and Marketing Manager 9 September 2013 2 years the date of the annual


Bas Xue 38 Administrative Manager 2 July 2013 4 years the date of the annual


During 3Q 2015 there weren’t changes in the composition of the Management Board.

2.9.2 Supervisory Board

As of 30 September 2015 the Supervisory Board was composed of the following members:


24

Name Age Position Independent

Member since Term

End of term

Ya Li 35 Chairman No 10 September 2013 4 years

the date of the annual


Ming Shen 52 Member Yes 10 September 2013 4 years



Liem Tsong

Lucien Tjon 53 Member Yes 10 September 2013 3 years



Zhanghe Du 44 Member No 29 June 2015 2 years



Rongfu Wu 29 Member No 10 September 2013 4 years



During 3Q 2015 there weren’t changes in the composition of the Supervisory Board.

3. Other information

3.1 Environmental matters

Waste generated by the Group in the production process includes steel scrap and waste from test runs. The

Group holds the required waste discharge permit which is valid until 21 April 2016. The permit is renewable.


25

4. Statement of the Management Board

Statement of the Management Board of Peixin International Group N.V. on compliance of the consolidated

quarterly financial statements:

The Management Board of Peixin International Group N.V. hereby represent that to the best of their knowledge:

— quarterly financial statements of Peixin International Group N.V. for the period ended 30 September 2015

and the comparable information are prepared in accordance with the applicable accounting,

— the quarterly accounts for the period ended 30 September 2015 give a true and fair view of the assets, the

liabilities, the financial position and the profits or the loss of the Company and the joint ventures included in the

consolidation,

— the quarterly report for the period ended 30 September 2015 give a true and fair view of the important events

of the past six-month period and their impact on the half-year financial statements, as well as the principal risks

and uncertainties for the six-month period to come, and the most important related party transactions.

Members of the Management Board:

Qiulin Xie Chairman --- signed ---

Kaida Xie Sales and Marketing Manager --- signed ---

Zhimin Huang Chief Financial Officer --- signed ---

Bas Xue Administrative Manager --- signed ---

19 November 2015 Amsterdam, The Netherlands.


26

PEIXIN INTERNATIONAL GROUP N.V.

CONSOLIDATED FINANCIAL STATEMENTS

for the nine months ended 30 September 2015


CONTENTS PAGES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME A

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION B

CONSOLIDATED STATEMENTS OF CASH FLOW C

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY D

SELECTED EXPLANATORY NOTES 1 – 29


Consolidated statement of comprehensive income

Notes 3Q 2014 3Q 2015 1-3Q 2014 1-3Q 2015

‘000 EUR ‘000 EUR ‘000 EUR ‘000 EUR

Revenue 8 17,705 16,487 49,269 51,437

Cost of sales 9 -11,203 -11,532 -30,924 -34,970

Gross profit 6,502 4,955 18,345 16,467

Other income 10 113 31 157 96

Distribution and selling expenses 11 -785 -978 -913 -2,182

Administrative expenses 12 -355 -357 -1,292 -1,165

Research and development expenses 13 -654 -962 -1,314 -2,440

Profit from operations 5,265 2,689 14,983 10,776

Other gains and losses -30 66 -31 -67

Finance income 4 -6 64 52

Finance costs 14 -64 -164 357

Profit before tax 5,175 2,972 14,852 11,118

0

Income tax expense 15 -811 -546 -2,284 -1,551

Profit for the year 4,364 2 426 12,568 9,567

Other comprehensive income

Items that will not be reclassified

Currency translation differences 3,916 2 475 4,002 7,741

Total comprehensive income 8,280 4 901 16,570 17,308

Attributable to:

Owner of the Company 8,280 4 901 16,570 17,308

Earnings per share-basic 18 0.64 0.21 1.27 0.74


B

Consolidated statement of financial position

Notes 31/12/2014 30/09/2015

‘000 EUR ‘000 EUR

Property, plant and equipment 17,941 19,253

Prepaid lease payments 17,692 19,769

Investment properties 14 -

Other deferred assets 786 1,017

Non-current assets 35,647 40,039

Inventories 19 9,177 16,602

Trade and other receivables 21 13,540 14,155

Prepaid lease payments 25 28

Bank balances and cash 22 13,150 20,839

Current assets 35,892 51,624

Trade and other payables 23 4,088 6,512

Advance from customers 24 2,283 2,881

Related parties payables 25 634 665

Income tax payable 752 515

Bank borrowings 26 - -

Current liabilities 7,757 10,573

Net current assets 28,135 41,051

Total assets less current liabilities 63,782 81,090

Capital and reserves

Share capital 27 13,000 13,000

Reserves 28 43,054 52,621

Foreign currency translation reserve 7,728 15,469

Total equity 63,782 81,090


C

Consolidated statement of cash flow

3Q 2013 3Q 2014 1-3Q 2013 1-3Q 2014

‘000 EUR ‘000 EUR ‘000 EUR ‘000 EUR

OPERATING ACTIVITIES

Profit before tax 4,813 5,175 13,315 14,852

Adjustments for:

Finance costs 55 64 180 164

Interest income -12 -13 -102 -64

Depreciation of property, plant and equipment 341 242 1,006 1,076

Amortisation of prepaid lease payments 6 6 17 17

Amortisation of investment properties 12 0 36 1

Amortisation of other deferred assets 49 206 147 470

Operating cash flows before movements in

working capital 5,264 5,680 14,599 16,516

(Increase) / Decrease in inventories -1,450 -2,311 -3,865 -4,795

(Increase) / Decrease in trade and other receivables 4,430 -1,692 -5,548 -1,721

(Increase) / Decrease in other deferred assets - - - -752

Increase / (Decrease) in related parties payables - 57 - 436

Increase / (Decrease) in trade and other payables 519 16 1,441 957

Increase / (Decrease) in advance from customers 1,686 413 2,546 -1,642

Cash generated from operations 10,449 2,163 9,173 8,999

Income taxes paid -777 -887 -1,895 -2,271

Net cash from operating activities 9 672 1,276 7,278 6,728

INVESTING ACTIVITIES

Interest received 12 13 102 64

Purchase of property, plant and equipment - -184 - -2,072

Purchase of land use right - -1,546 - -8,678

Net cash used in investing activities 12 - 1,717 102 -10,686

FINANCING ACTIVITIES

Interest paid -55 -64 -180 -164

Dividends paid - - - -1,516

New bank loans raised - - - 3,997

Repayment of borrowings -726 - -594 -

Capital injection 45 - 45 -

Net cash used in financing activities -736 -64 -729 2,317

Net increase in cash and cash equivalent 8,948 -505 6,651 -1,641

Effects of currency translation -677 2,097 -141 2,172

Cash and cash equivalents at beginning of period 9,674 10,922 11,435 11,983

Cash and cash equivalents at end of period 17,945 12,514 17,945 12,514


D

Consolidated statement of changes in equity

Statutory

Foreign currency surplus Retained Results for

Share capital Share premium translation reserve reserve profits the year Total

kEUR kEUR kEUR kEUR kEUR kEUR kEUR

(Note27) (Note28) (Note28) (Note28) (Note28)

Balance at 1 January 2014 41 3,302 2,179 1,630 5,609 11,369 24,130

Result appropriation - - - - 11,369 -11,369 -

Profit for the period - - - - - 11,312 11,312

Other comprehensive income for the period - - -133 - - - -133

Balance at 30 September 2014 41 3,302 2,046 1,630 16,978 11,312 35,309


Other comprehensive income for the period - -607 -558 - - - -1,165

Appropriation to statutory surplus reserve - - - 1,007 -1,007 - -

Shares transferred from BVI to N.V. -41 41 - - - - -

Capital injection 45 - - - - - 45

Share capital injected by contribution of shares 11,955 16,976 - - -28,931 - -

Share capital injected by IPO 1,000 2,587 - - - - 3,587

Balance at 31 December 2014 13,000 22,299 1,488 2,637 -12,960 15,772 42,236

Result appropriation - - - - 15,772 -15,772 -


Other comprehensive income for the period - - 4,002 - - - 4,002

Payment of dividends - - - - -1,516 - -1,516

Balance at 30 September 2015 13,000 22,299 5,490 2,637 1,296 12,568 57,290

Peixin International Group N.V. Notes to the interim consolidated financial statements (continued)

1

1. GENERAL INFORMATION

Peixin International Group N.V. (the “Company”) is the vehicle created for listing shares on the

Warsaw Stock Exchange. Peixin International Group N.V. is a public limited liability company

(naamloze vennootschap) incorporated under Dutch law by a notarial deed dated 2 July 2013. The

Company has its statutory seat (statutaire zetel) in Amsterdam, the Netherlands and its registered

office at Prins Bernhardplein 200, 1097 JB Amsterdam, the Netherlands. The Company is registered

with the trade register of the Chamber of Commerce in Amsterdam, the Netherlands, under the

number 58288449. The Company operates under Dutch law.

Peixin International Group Ltd. (“Peixin International BVI”) is a limited company incorporated in

the British Virgin Islands ("BVI") on 29 June 2004 by Xie Qiulin. The registered office of the

Company is situated at Akara Bldg., 24 De Castro Street, Wickhams Cay I, Road Town, Tortola,

British Virgin Islands. The principal business of Peixin International BVI is through its subsidiaries,

Fujian Peixin Machine Manufacture Industry Co., Ltd. ("Fujian Peixin"), Quanzhou Peixin Machine

Manufacture Industrial Co., Ltd. ("Quanzhou Peixin") and Baixin Industry Co., Ltd. (“Quanzhou

Baixin”) in the People's Republic of China ("PRC"). The address of the principal place of Fujian

Peixin, Quanzhou Peixin and Quanzhou Baixin is disclosed in Note 2.

The principal activities of the Company and its subsidiaries (the "Group") are the research and

development, manufacturing and trading of daily-use paper machinery. Its market mainly locates in

PRC.

2. GROUP REORGANISATION AND BASIS OF PRESENTATION OF CONSOLIDATED

FINANCIAL STATEMENTS

As at 30 September 2015, the Group comprised of the parent company Peixin International Group

N.V. (registered under the Dutch law with its seat in Amsterdam) and four subsidiaries: Peixin

International Group Ltd. (Peixin International BVI), Fujian Peixin Machine Manufacture Industry

Co., Ltd. (Fujian Peixin), Quanzhou Peixin Machine Manufacture Industry Co., Ltd. (Quanzhou

Peixin) and Baixin Industry Co., Ltd. (Quanzhou Baixin).

Peixin International Group N.V. is the sole shareholder, whereas Peixin International Group Ltd.

(Peixin International BVI) is a sole shareholder of three subsidiaries: Fujian Peixin Machine

Manufacture Industry Co., Ltd., Quanzhou Peixin Machine Manufacture Industry Co., Ltd. and

Baixin Industry Co., Ltd.

On 14 August 2013 all shares in Peixin International Group Ltd. (Peixin International BVI) were

contributed to the Company in exchange for newly issued shares in the share capital of the Company

as a part of the Group restructuring in connection with the public offering.

Peixin International BVI was established by Xie Qiulin with a share capital of USD 50,000 divided

into 50,000 shares with a par value of USD 1 each. On 7 February 2013 Xie Qiulin transferred 2,500

shares to Jinyuan Investment Holding Ltd., 2,500 shares to Xinsheng Investment Holding Ltd. and

1,250 shares to Best Fortune Investment Enterprise Limited. On 14 August 2013 Xie Qiulin,

Xinsheng Investment Holding Ltd., Jinyuan Investment Holding Ltd. and Best Fortune Investment

Enterprise Limited contributed all their shares in Peixin International BVI to the Company in

exchange for shares in the share capital for the Company.

Due to the fact that the Company was incorporated on 2 July 2013, there is no historical financial

information relating to the Company for the full year ended 31 December 2013. The consolidated

figures of Peixin International Group Ltd. (Peixin International BVI) have been used as comparative

figures for the interim consolidated financial statements of comprehensive income.


2


FINANCIAL STATEMENTS-continued

As at 30 September 2015 and the date of approval of the consolidated financial statements,

Peixin International Group N.V. had the following wholly-owned subsidiaries:

Place and date of

Name of entity establishment Registered capital Principal activities

Fujian Peixin (i) Quanzhou, HKD 50,000,000 Manufacture of daily-

used

Fujian Province, PRC paper machinery

8 November 2006

Quanzhou Peixin (ii) Quanzhou, RMB 5,800,000 Manufacture of daily-

used

Fujian Province, PRC paper machinery

28 November 1994

Peixin International BVI (iii) British Virgin Islands, USD 50,000 Investing

29 June 2004

Quanzhou Baixin (iv) Yongchun, PRC RMB 50,000,000 Manufacture of daily-

used

18 April 2014 paper machinery

(i) Fujian Peixin was established by Peixin International BVI on 8 November 2006 with a registered

capital of Hongkong Dollar 28,800,000. The registered capital was increased to Hongkong Dollars

50,000,000 in November 2013.

(ii) Quanzhou Peixin was established on 28 November 1994 with a registered capital of Renminbi

5,000,000 by Yee Lung Enterprise Co., Ltd. (30% share capital) where Xie Qiulin being the ultimate

controlling party and Quanzhou Licheng Light Industry Machinery Factory (70% share capital). The

registered capital was increased to Renminbi 5,800,000 in November 2002 and the entire share

capital of Quanzhou Peixin was transferred to Peixin International BVI in June 2006.

(iii) Peixin International BVI was established by Xie Qiulin with a share capital of USD 50,000 divided

into 50,000 shares with a par value of USD 1 each. On 7 February 2013 Xie Qiulin transferred 2,500

shares to Jinyuan Investment Holding Ltd., 2,500 shares to Xinsheng Investment Holding Ltd. and

1,250 shares to Best Fortune Investment Enterprise Limited. On 14 August 2013 Xie Qiulin,

Xinsheng Investment Holding Ltd., Jinyuan Investment Holding Ltd. and Best Fortune Investment

Enterprise Limited contributed all their shares in Peixin International BVI to the Company in

exchange for shares in the share capital for the Company.

(iv) Quanzhou Baixin was established on 18 April 2014 with a registered capital of Renminbi

50,000,000.


3


FINANCIAL STATEMENTS-continued

As of 30 September 2015 and as of the date of publication of 3Q 2015 report, the Company’s

shareholding structure was as follows:

Shareholder No. of shares % in the share capital

P.I. Investment Limited

- fully controlled by Mr Xie Qiulin (Principal

Shareholder)

10,500,000 80.8%

Xinsheng Investment Holding Ltd

- fully controlled by Mr Zhang Fan (Macau

Resident)

600,000 4.6%

Jinyuan Investment Holding Ltd - fully controlled

by Mr Li Meiqing (HK Resident)

539,202 4.15%

Others 1,360,798 10.47%

Total 13,000,000 100%

3. APPLICATION OF NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING

STANDARDS ("IFRSs")

Except as described below, for the period ended 30 September 2015 the Company has consistently

adopted all the new and revised standards, amendments and interpretations (collectively IFRSs) issued

by the International Accounting Standards Board ("IASB") and the IFRS Interpretations Committee

(formerly known as "International Financial Reporting Interpretations Committee" ("IFRIC")) of the

IASB as adopted by the European Union ("adopted IFRSs") that are effective for financial year

beginning on 1 January 2013 in the preparation of the consolidated financial statements throughout the

Periods.

The Company has applied the following new and revised standards, amendments or interpretations

that have been issued and effective during the reporting period:

IAS 27 (Revised 2011) Separate Financial Statements

IAS 28 (Revised 2011) Investments in Associates and Joint Ventures

IFRS 10 Consolidated Financial Statements

IFRS 11 Joint Arrangements

IFRS 12 Disclosure of Interests in Other Entities

IAS 32 (Amendments) Offsetting Financial Assets and Financial Liabilities

IFRIC 20 Stripping Costs in the Production Phase of a Surface Mine

Its application has had no impact on the consolidated financial statements.


4

3. APPLICATION OF NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING

STANDARDS ("IFRSs") - continued

At the date these consolidated financial statements are authorized for issuance, the IASB has issued

the following new and revised International Accounting Standards ("IASs"), IFRSs, amendments

and IFRICs which are not yet effective in respect of the years. The Company has not early applied

the following new and revised standards, amendments or interpretations that have been issued but

are not yet effective:

IFRS 14 Regulatory Deferral Accounts

IAS 16 (amendments) Property, Plant and Equipment

IAS 19 (amendments) Employee Benefits

IAS 38 (amendments) Intangible Assets

IFRS 11 (amendments) Joint Arrangements

IFRIC 21 Levies

Annual Improvements 2010-2012 Cycle

Annual Improvements 2011-2013 Cycle

The directors of the Company anticipate that the application of the new and revised standards,

amendments or interpretations will have no material impact on the consolidated financial statements

of the Company.

4. SIGNIFICANT ACCOUNTING POLICIES

The principal accounting policies adopted in the preparation of the financial statements are set

out below. The policies have been consistently applied to all the years presented, unless

otherwise stated.

Basis of preparation

The consolidated financial statements have been prepared on the historical cost basis and in

accordance with International Financial Reporting Standards as adopted by the European

Union. The principal accounting policies are set out below.

Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company

and entities controlled by the Company (its subsidiaries). Control is achieved where the

Company has the power to govern the financial and operating policies of an entity so as to

obtain benefits from its activities.

Where necessary, adjustments are made to the financial statements of subsidiaries to bring

their accounting policies into line with those used by other members of the Group.

All intra-group transactions, balances, income and expenses are eliminated on consolidation.


5

4. SIGNIFICANT ACCOUNTING POLICIES –continued

Foreign currencies

Functional and presentation currency

Functional and presentation currency

Items included in the financial statements are measured using the currency of the primary

economic environment in which the entity operates (the "functional currency").

The Group conducts its business predominately in the PRC and hence its functional currency

is the Renminbi (RMB).

The shareholders of the Company made use of a Dutch stock listed company which acts as

parent (holding) company. Therefore the financial statements of the company have been

presented in EUR. Translation from RMB to EUR found place at the following rates:

Period end rates Average rates

30 September 2014 EUR 1.00= RMB 8.3946 EUR 1.00=RMB 8.4132

31 December 2014 EUR 1.00= RMB 7.4556 EUR 1.00=RMB 8.1255

30 September 2015 EUR 1.00= RMB 6.9608 EUR 1.00=RMB 6.6648

The results and financial positions in functional currency are translated into the presentation

currency of the Company as follows:

(1) Assets and liabilities for each balance sheet presented are translated at the closing rate at

the date of that balance sheet;

(2) Income and expenses for each income statement are translated at average exchange rates

(unless this average is not a reasonable approximation of the cumulative effect of the rates

prevailing on the transaction dates, in which case income and expenses are translated at the

dates of the transactions);

(3) Share equity, share premium and dividends are translated at historical exchange rates; and

(4) All resulting exchange differences are recognized in translation reserve, a separate

component of equity.

Transactions and balances

Foreign currency transactions are measured and recorded in the functional currency using the

exchange rates prevailing at the dates of the transactions. Monetary assets and liabilities

denominated in foreign currencies are translated at the closing rate ruling at the respective

balance sheet dates. Foreign exchange gains and losses resulting from the settlement of such

transactions and from the translation at year-end exchange rates of monetary assets and

liabilities denominated in foreign currencies are recognized in the income statement.

Non-monetary items are measured in terms of historical cost in a foreign currency are

translated using the exchange rates as at the date of the initial transactions. Non-monetary

items measured at fair value in a foreign currency are translated using the exchange rates at

the date when the fair value was determined.


6

4. SIGNIFICANT ACCOUNTING POLICIES - continued

Segment reporting

Operating segments, and the amounts of each segment item reported in the financial

statements, are identified from the financial information provided regularly to the Group’s

most senior executive management for the purposes of allocating resources to, and assessing

the performance of, the Group’s various lines of business and geographical locations.

Individually material operating segments are not aggregated for financial reporting purposes

unless the segments have similar economic characteristics and are similar in respect of the

nature of products and services, the nature of production processes, the type or class of

customers, the methods used to distribute the products or provide the services, and the nature

of the regulatory environment. Operating segments which are not individually material may

be aggregated if they share each of these criteria.

Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable and

represents amounts receivable for goods sold in the normal course of business, net of

discounts and sales related taxes.

Revenue from the sale of goods is recognized when all the following conditions are satisfied:

the Group has transferred to the buyer the significant risks and rewards of ownership of

the goods;

the Group retains neither continuing managerial involvement to the degree usually

associated with ownership nor effective control over the goods sold;

the amount of revenue can be measured reliably;

it is probable that the economic benefits associated with the transaction will flow to the

Group; and the costs incurred or to be incurred in respect of the transaction can be measured

reliably.

Specifically, revenue from sale of goods is recognized when the goods are delivered and title

has passed.

Interest income from a financial asset is accrued on a time basis, by reference to the principal

outstanding and at the effective interest rate applicable, which is the rate that exactly

discounts the estimated future cash receipts through the expected life of the financial asset to

that asset's net carrying amount on initial recognition.


7


Research and development expenditure

Expenditure on research activities is recognized as an expense in the period in which it is

incurred. An internally-generated intangible asset arising from development is recognized if,

and only if, all of the following have been demonstrated:

the technical feasibility of completing the intangible asset so that it will be available

for use or sale;

the intention to complete the intangible asset and use or sell it;

the ability to use or sell the intangible asset;

how the intangible asset will generate probable future economic benefits;

the availability of adequate technical, financial and other resources to complete the

development and to use or sell the intangible asset;

the ability to measure reliably the expenditure attributable to the intangible asset

during its development.

Cost that are directly attributable to the development phase of new products and designs are

also expensed if they do not yet meet the criteria to be recognized as an intangible asset in

accordance with IAS 38.

Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of

qualifying assets, which are assets that necessarily take a substantial period of time to get

ready for their intended use or sale, are added to the cost of those assets until such time as the

assets are substantially ready for their intended use or sale.

All other borrowing costs are recognized in profit or loss in the period in which they are

incurred.

Retirement benefit costs

Pursuant to the relevant regulations of the PRC government, the Group participates in a local

municipal government retirement benefits scheme (the "Scheme"), whereby the subsidiaries

located in the PRC are required to contribute a certain percentage of the basic salaries of its

employees to the Scheme to fund their retirement benefits. The local municipal government

undertakes to assume the retirement benefits obligations of all existing and future retired

employees of the subsidiaries located in the PRC. The only obligation of the Group with

respect to the Scheme is to pay the on-going required contributions under the Scheme

mentioned above. Contributions under the Scheme are charged to the profit or loss as

incurred. There are no provisions under the Scheme whereby forfeited contributions may be

used to reduce future contributions. These plans are considered defined contribution plans.

The Group has no legal or constructive obligations to pay further contributions after its

payment of the fixed contributions into the national pension schemes. Contributions to

national pension schemes are recognized as an expense in the period in which the related

service is performed.


8


Taxation

Income tax expense represents the sum of the tax currently payable and deferred tax.

The tax currently payable is based on taxable profit for the period. Taxable profit differs from

profit as reported in the consolidated statements of comprehensive income because of items of

income or expense that are taxable or deductible in other years and items that are never

taxable or deductible. The Group's liability for current tax is calculated using tax rates that

have been enacted or substantively enacted by the end of the reporting period.

Deferred tax is recognized on temporary differences between the carrying amounts of assets

and liabilities in the consolidated financial statements and the corresponding tax bases used in

the computation of taxable profit. Deferred tax liabilities are generally recognized for all

taxable temporary differences.

Deferred tax assets are generally recognized for all deductible temporary differences to the

extent that it is probable that taxable profits will be available against which those deductible

temporary differences can be utilized. Such deferred tax assets and liabilities are not

recognized if the temporary difference arises from goodwill or from the initial recognition

(other than in a business combination) of other assets and liabilities in a transaction that

affects neither the taxable profit nor the accounting profit.

Deferred tax liabilities are recognized for taxable temporary differences associated with

investments in subsidiaries, except where the Group is able to control the reversal of the

temporary difference and it is probable that the temporary difference will not reverse in the

foreseeable future. Deferred tax assets arising from deductible temporary differences

associated with such investments are only recognized to the extent that it is probable that there

will be sufficient taxable profits against which to utilize the benefits of the temporary

differences and they are expected to reverse in the foreseeable future.

The carrying amount of deferred tax assets is reviewed at the end of each reporting period and

reduced to the extent that it is no longer probable that sufficient taxable profits will be

available to allow all or part of the asset to be recovered.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in

the period in which the liability is settled or the asset realized, based on tax rates (and tax laws)

that have been enacted or substantively enacted by the end of the reporting period. The

measurement of deferred tax liabilities and assets reflects the tax consequences that would

follow from the manner in which the Group expects, at the end of the reporting period, to

recover or settle the carrying amount of its assets and liabilities.

Current and deferred tax are recognized in profit or loss, except when they relate to items that

are recognized in other comprehensive income or directly in equity, in which case, the current

and deferred tax are also recognized in other comprehensive income or directly in equity

respectively. Where current tax or deferred tax arises from the initial accounting for a

business combination, the tax effect is included in the accounting for the business

combination.


9


Property, plant and equipment

Property, plant and equipment ("PPE") including buildings held for use in the production or

supply of goods or services, or for administrative purposes other than construction in progress

are stated at cost less subsequent accumulated depreciation and accumulated impairment

losses.

Depreciation is provided to write off the cost of items of property, plant and equipment other

than construction in progress over their estimated useful lives and after taking into account of

their estimated residual value, using the straight-line method.

Construction in progress includes property, plant and equipment in the course of construction

for production or for its own use purposes. Construction in progress is carried at cost less any

recognized impairment loss. Construction in progress is classified to the appropriate category

of property, plant and equipment when completed and ready for intended use. Depreciation of

these assets, on the same basis as other property assets, commences when the assets are ready

for their intended use.

An item of property, plant and equipment is derecognized upon disposal or when no future

economic benefits are expected to arise from the continued use of the asset. Any gain or loss

arising on derecognition of the asset (calculated as the difference between the net disposal

proceeds and the carrying amount of the item) is included in profit or loss in the period in

which the item is derecognized.

Investment property

Investment property, principally comprising leasehold land and buildings, is held for long-

term rental yields or for capital appreciation or both, and that is not occupied by the group. It

also includes properties that are being constructed or developed for future use as investment

properties.

Investment property is initially measured at cost, including related transaction costs and

where applicable borrowing costs. After initial recognition, investment properties are

measured under the cost model that they are recognized at cost and depreciated systematically

over its useful life.

Other deferred assets

Other deferred assets, principally comprising costs of plant greening project and office

building renovation, are held for administrative purposes. Other deferred assets are initially

measured at cost and amortized systematically over its useful life.

Prepaid investments

Prepaid investments are principally comprising of prepayments for machineries and land use

right. The amount will be transferred to property, plant and equipment and prepaid lease

payments when the constructions are completed.


10


Leased assets

Where substantially all of the risks and rewards incidental to ownership of a leased asset have

been transferred to the Group (a "finance lease"), the asset is treated as if it had been

purchased outright. The amount initially recognized as an asset is the lower of the fair value

of the leased property and the present value of the minimum lease payments payable over the

term of the lease. The corresponding lease commitment is shown as a liability. Lease

payments are analyzed between capital and interest. The interest element is charged to the

consolidated statement of comprehensive income over the period of the lease and is

calculated so that it represents a constant proportion of the lease liability. The capital element

reduces the balance owed to the lessor.

Where substantially all of the risks and rewards incidental to ownership are not transferred to

the Group (an "operating lease"), the total rentals payable under the lease are charged to the

consolidated statement of comprehensive income on a straight-line basis over the lease term.

The aggregate benefit of lease incentives is recognized as a reduction of the rental expense

over the lease term on a straight-line basis.

Inventories

Inventories are stated at the lower of cost and net realizable value. Costs of inventories are

determined using the weighted average method. Net realizable value represents the estimated

selling price for inventories less all estimated costs of completion and costs necessary to

make the sale.

Financial instruments

Financial assets and financial liabilities are recognized on the consolidated statements of

financial position when a group entity becomes a party to the contractual provisions of the

instrument.

Financial assets and financial liabilities are initially measured at fair value. Transaction costs

that are directly attributable to the acquisition or issue of financial assets and financial

liabilities are added to or deducted from the fair value of the financial assets or financial

liabilities, as appropriate, on initial recognition.

Financial assets

The Group's financial assets are classified as loans and receivables.

Effective interest method

The effective interest method is a method of calculating the amortized cost of a financial asset

and of allocating interest income over the relevant period. The effective interest rate is the

rate that exactly discounts estimated future cash receipts (including all fees and points paid or

received that form an integral part of the effective interest rate, transaction costs and other

premiums or discounts) through the expected life of the financial asset, or, where appropriate,

a shorter period to the net carrying amount on initial recognition.

Interest income is recognized on an effective interest basis for debt instruments.


11


Financial instruments-continued

Financial assets-continued

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable

payments that are not quoted in an active market. Loans and receivables (including trade and

other receivables, related parties receivables, pledged bank deposits and bank balances and

cash) are measured at amortized cost using the effective interest method, less any impairment

(see accounting policy on impairment loss on loans and receivables below).

Impairments of loans and receivables

Loans and receivables are assessed for indicators of impairment at the end of the reporting

period. Loans and receivables are impaired where there is objective evidence that, as a result

of one or more events that occurred after the initial recognition of the loans and receivables,

the estimated future cash flows of the loans and receivables have been affected.

Objective evidence of impairment could include:

significant financial difficulty of the issuer or counterparty;

default or delinquency in interest or principal payments;

it becoming probable that the borrower will enter bankruptcy or financial

reorganization.

For certain categories of financial asset, such as trade and other receivables, assets that are

assessed not to be impaired individually are subsequently assessed for impairment on a

collective basis. Objective evidence of impairment for a portfolio of receivables could include

the Group's past experience of collecting payments, and increase in the number of delayed

payments in the portfolio past the average credit period, observable changes in national or

local economic conditions that correlate with default on receivables.

An impairment loss is recognized in profit or loss when there is objective evidence that the

asset is impaired, and is measured as the difference between the asset’s carrying amount and

the present value of the estimated future cash flows discounted at the original effective

interest rate.

The carrying amount of the loans and receivables is reduced by the impairment loss directly

for all financial assets with exception of trade and other receivables, where the carrying

amount is reduced through the use of an allowance account. Changes in carrying amount of

the allowance account are recognized in profit or loss. When a trade and other receivable are

considered uncollectible, it is written off against the allowance account. Subsequent

recoveries of amounts previously written off are credited to profit or loss.

If, in a subsequent period, the amount of impairment loss decreases and the decrease can be

related objectively to an event occurring after the impairment losses was recognized, the

previously recognized impairment loss is reversed through profit or loss to the extent that the

carrying amount of the asset at the date the impairment is reversed does not exceed what the

amortized cost would have been had the impairment not been recognized.


12


Financial instruments-continued

Financial assets-continued

Cash and cash equivalents

Cash and cash equivalents comprise cash at bank and on hand, demand deposits with banks and

other financial institutions, and short-term, highly liquid investments that are readily convertible

into known amounts of cash and which are subject to an insignificant risk of changes in value,

having been within three months of maturity at acquisition.

Financial liabilities and equity

Financial liabilities and equity instruments issued by a group entity are classified according to the

substance of the contractual arrangements entered into and the definitions of a financial liability

and an equity instrument.

An equity instrument is any contract that evidences a residual interest in the assets of the Group

after deducting all of its liabilities.

Effective interest method

The effective interest method is a method of calculating the amortized cost of a financial liability

and of allocating interest expense over the relevant period. The effective interest rate is the rate

that exactly discounts estimated future cash payments (including all fees and points paid or

received that form an integral part of the effective interest rate, transaction costs and other

premiums or discounts) through the expected life of the financial liability, or, where appropriate,

a shorter period to the net carrying amount on initial recognition.

Interest expense is recognized on an effective interest basis.

Financial liabilities

Financial liabilities including trade and other payables advance from customers and bank

borrowings are subsequently measured at amortized cost, using the effective interest method.

Equity instruments

Equity instruments issued by the group entities are recorded at the proceeds received, net of

direct issue costs.

Derecognition

Financial assets are derecognized when the rights to receive cash flows from the assets expire or,

the financial assets are transferred and the Group has transferred substantially all the risks and

rewards of ownership of the financial assets. On derecognition of a financial asset, the difference

between the asset's carrying amount and the sum of the consideration received and receivable is

recognized in profit or loss.

Financial liabilities are derecognized when the obligation specified in the relevant contract is

discharged, cancelled or expires. The difference between the carrying amount of the financial

liability derecognized and the consideration paid and payable is recognized in profit or loss.


13


Capital and Reserves

Share capital represents the nominal value of shares that have been issued by the Group.

Share capital is determined using the nominal value of shares that have been issued.

Retained profits include all current and prior period results as determined in the combined

statement of comprehensive income.

Foreign currency translation differences arising on the translation are included in the currency

translation reserve.

In accordance with the relevant laws and regulations of PRC, the subsidiaries of the Group

established in PRC are required to transfer 10% of its annual statutory net profit (after

offsetting any prior years’ losses) to the statutory reserve. When the balance of such reserve

reaches 50% of the subsidiary’s share capital, any further transfer of its annual statutory net

profit is optional. Such reserve may be used to offset accumulated losses or to increase the

registered capital of the subsidiary subject to the approval of the relevant authorities.

However, except for offsetting prior years’ losses, such statutory reserve must be maintained

at a minimum of 25% of the share capital after such usage. The statutory reserves are not

available for dividend distribution to the shareholders.

All transactions with owners of the Group are recorded separately within equity.

5. SIGNIFICANT MANAGEMENT JUDGMENT IN APPLYING ACCOUNTING POLICIES

The preparation of financial statements in conformity with IFRS requires management to

exercise judgment in the process of applying the Group’s accounting policies and requires

the use of accounting estimates and assumptions that affect the reported amounts of assets

and liabilities and disclosure of contingent assets and liabilities at the date of financial

statements and reported amount of revenue and expenses during the reporting period. The

following estimates that have a significant risk of causing a material adjustment to the

carrying amount of assets and liabilities within the next financial year are disclosed below:

Allowance for Bad and Doubtful debts

Allowances for bad and doubtful debts are based on an assessment of the recoverability of

trade and other receivables. Allowances are applied to trade and other receivables where

events or changes in circumstances indicate that the balances may not be collectible. The

identification of bad and doubtful debts requires the use of judgment and estimates, where

the expected outcome is different from the original estimate, such difference will impact

carrying value of trade and other receivables and doubtful debt expenses in the period in

which such estimate has been charged.


14

5. SIGNIFICANT MANAGEMENT JUDGMENT IN APPLYING ACCOUNTING POLICIES

-continued

Income Tax

The Group has exposure to income taxes in numerous jurisdictions. Significant judgment is

involved in determining the Group’s provision for income taxes. There are certain

transactions and computations for which the ultimate tax determination is uncertain during

the ordinary course of business. The Group recognizes liabilities for expected tax issues based

on estimates of whether additional taxes will be due. Where the final tax outcome of these

matters is different from the amounts that were initially recognized, such differences will

impact the income tax and differed tax provisions in the period in which such determination is

made. The carrying amount of the Group’s income tax payable as at 31 December 2014 and

30 September 2015 amounted to kEUR 752 and kEUR 569 respectively.

6. KEY SOURCES OF ESTIMATION UNCERTAINTY

In the application of the Group's accounting policies, which are described in Note 4,

management is required to make estimates and assumptions about the carrying amounts of

assets and liabilities that are not readily apparent from other sources. The estimates and

associated assumptions are based on historical experience and other factors that are

considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to

accounting estimates are recognized in the period in which the estimate is revised if the

revision affects only that period or in the period of the revision and future periods if the

revision affects both current and future periods.

The following are the key assumptions concerning the future, and other key sources of

estimation uncertainty at the end of the reporting period, that have a significant risk of

causing a material adjustment to the carrying amounts of assets within the next financial year.

Depreciation of building, machinery and equipment

As described in Note 4, the Group reviews the estimated useful lives and residual values of

property, plant and equipment at the end of each reporting period. The cost of building,

machinery and equipment is depreciated on a straight-line basis over the assets' estimated

useful lives. Management estimates the useful lives of these buildings, machinery and

equipment to be within 5 to 20 years. These are the common life expectancies applied in the

same industry. Changes in the expected level of usage and technological developments could

impact the economic useful lives and the residual values of these assets, therefore future

depreciation charges could be revised.


15

7. SEGMENT REPORTING

Management currently identifies the Group’s four product categories as operating segments, which are

sanitary napkins machines, diaper machines, facial tissue machines and other paper machines. The

segment presentation is in accordance with management’s expectation of future business developments.

These operating segments are monitored and strategic decisions are made on the basis of segmental

gross margins.

By business

By Geographical Information

REVENUE

Revenue: 3Q 2014 3Q 2015 1-3Q 2014 1-3Q 2015

‘000 EUR ‘000 EUR ‘000 EUR ‘000 EUR

Sanitary napkins

machines 7,290 3,502 18,996 18,815

Diaper machines 7,367 8,852 15,945 22,814

Facial tissue machines 2,179 2,546 5,897 7,045

Other paper machines 869 1,586 2,160 2,762

Total 17,705 16,486 42,998 51,436

Segment gross profit : 3Q 2014 3Q 2015 1-3Q 2014 1-3Q 2015

‘000 EUR ‘000 EUR ‘000 EUR ‘000 EUR

Sanitary napkins

machines 2,802 1,036 8,373 6,147

Diaper machines 2,567 2,478 7,226 7,048

Facial tissue machines 774 843 2,072 2,368

Other paper machines 359 598 674 904

Total 6,502 4,955 18,345 16,467

Revenue: 3Q 2014 3Q 2015 1-3Q 2014 1-3Q 2015

‘000 EUR ‘000 EUR ‘000 EUR ‘000 EUR

Direct sales

-Mainland China 9,618 6,439 31,328 21,206

-Outside Mainland China 906 1,631 4,025 5,523

Sales to trading

companies

7,181

8,416

13,916 24,707

Total 17,705 16,486 49,269 51,436


16

8. REVENUE

Revenue represents revenue arising on sales of goods.

Revenue is denominated in the following currencies:

Revenue: 3Q 2014 3Q 2015 1-3Q 2014 1-3Q 2015

‘000 EUR ‘000 EUR ‘000 EUR ‘000 EUR

Renminbi ("RMB") 16,799 14,855 45,244 45,913

United States Dollars

("USD")

906 1,631 4,025 5,523

Total 17,705 16,486 49,269 51,436

9. COST OF SALES

Cost of sales comprises of purchasing materials, labor costs for personnel employed in production,

depreciation and amortization of non-current assets used for production purpose, outsourced

manufacturing cost, taxes and surcharges and water and electricity. The following table shows a

breakdown of cost of sales for the period under review for each category:

* Tax and surcharges are mainly Urban Maintenance and Construction Tax (7% of Valued Added Tax

payment amount), Extra Charges of Education Fund (3% of Valued Added Tax payment amount) and

Local Surcharge for Education Fund (2% of Valued Added Tax payment amount).

1-3Q 2014 1-3Q 2015

‘000 EUR ‘000 EUR

Changes in inventories of finished

goods and work in progress -2 770 -6 804

Materials consumed in production 27 320 33 743

-Glue machines and motors 9 073 10 858

-Steel 6 274 8 528

-Electric controllers 4 773 5 621

-Knife roller\cylinder 1 105 1 353

-Other components 5 089 6 158

-Auxiliary materials 1 006 1 225

Labour 2 794 2974

Depreciation and amortization 969 1607

Outsourced manufacturing cost 1 145 1308

Taxes and surcharges * 325 542

Water and electricity 402 475

Others 230 123

Foreign currency translation difference 509 960

Total 30 924 34928


17

10. OTHER INCOME

1-3Q 2014 1-3Q 2015

‘000 EUR ‘000 EUR Government

grant 82 9

Rental income 37 11 Sales of spare

parts 38 77

Total 157 96

11. DISTRIBUTION AND SELLING EXPENSES

12. ADMINISTRATIVE EXPENSES

13. RESEARCH AND DEVELOPMENT EXPENSES

1-3Q 2014 1-3Q 2015

‘000 EUR ‘000 EUR

Staff costs 430 496

Marketing and advertising costs 148 1 064

Post-sales services costs 167 354

Traveling costs 60 49

Depreciation 4 2

Others 104 217

Total 913 2 182

1-3Q 2014 1-3Q 2015

‘000 EUR ‘000 EUR

Staff costs 295 532

Depreciation and amortisation

charges 270 92

Entertainment and office expenses 189 123

Miscellaneous taxes 130 197

Professional service fee 213 -

Others 195 221

Total 1,292 1,165

1-3Q 2014 1-3Q 2015

‘000 EUR ‘000 EUR

Materials 742 1,221

Staff costs 400 555

External advisors 168 516

Depreciation charges 4 147

Total 1,314 2,440


18

14. FINANCE COSTS

Bank borrowings interests are charged on interest rates of 6.000% to 6.560%, 6.560%, per annum during the

period ended 30 September 2015 respectively.

1-3Q 2015

‘000 EUR

Foreign exchange loss, net 2,763

3Q 2014 1-3Q 2014 1-3Q 2015

‘000 EUR ‘000 EUR ‘000 EUR

Current tax: PRC enterprise income tax 811 2,284 1,551

12. INCOME TAX EXPENSE

Peixin International Group N.V. is incorporated in the Netherlands and does not have any taxable income.

Peixin International Group BVI is incorporated in BVI and does not have any taxable profits subject to BVI

Profits Tax since its incorporation.

The applicable enterprise income tax rate of Fujian Peixin is 25%. Being a foreign owned enterprise, Fujian

Peixin is entitled to full exemption from enterprise income tax ("EIT") for the first two years and a 50%

reduction in EIT for the next three years, commencing from the first profitable year after offsetting all tax

losses carried forward from the previous five years. 2007 was the first profitable year of Fujian Peixin,

accordingly, the effective income tax rate of Fujian Peixin in the years of 2010 and 2011 is 12.5%. Since year

2012, Fujian Peixin obtained the “High and New Technology” certificate thus having been enjoying a low tax

rate of 15%.

The applicable enterprise income tax rate of Quanzhou Peixin is 25%. At 30 September 2013 and 2014,

Quanzhou Peixin has no recognized tax losses and no income tax was charged for the periods ended 30

September 2013 and 2014.

The applicable enterprise income tax rate of Quanzhou Baixin is 25%. At 30 September 2013 and 2014,

Quanzhou Baixin has no recognized tax losses and no income tax was charged for the periods ended 30

September 2013 and 2014.

Peixin International Group N.V. Notes to the interim consolidated financial position (continued)

19

13. EMPLOYEES' EMOLUMENTS

1-3Q 2014 1-3Q 2015

‘000 EUR ‘000 EUR

Salaries and other short-term benefits 3,639 4,857

Defined contribution benefit schemes 106 163

Total employee benefits expense

(including directors’ emoluments) 3,745 5,020

The employees of the Group’s PRC subsidiaries are members of state-managed retirement benefit

schemes operated by the local government. The subsidiaries are required to contribute a specified

percentage of its payroll costs to the retirement benefit schemes to fund the benefits. The only obligation

of the Group with respect to the retirement benefit schemes is to make the specified contributions.


20

14. KEY MANAGEMENT EMOLUMENTS

The emoluments paid or payable to the directors of the Company were

as follows:

1-3Q 2014 1-3Q 2015

‘000 EUR ‘000 EUR

Directors' emoluments

- Salaries

Xie Qiulin 51 21

Xie Kaida 18 6

Dai Hongyan 30 13

99

Supervisory board' s emoluments

- Salaries

Li Ya 6 8

Shen Ming 6 8

Liem Tsong LucienTjon 3 4

Jaroslaw Dariusz Dabrowski 12 16

Wu Rongfu 21 9

48

- Social Welfare

Xie Qiulin * 0,14

Xie Kaida * 0,14

Dai Hongyan * 0,14

Wu Rongfu * 0,14

* *


21

15. EARNINGS PER SHARE

Weighted average number of ordinary shares used in the calculation of basic earnings per share are as

follows:

3Q 2014 3Q 2015 1-3Q 2014 1-3Q 2015

Weighted average number of ordinary

shares for the purpose of basic

earnings per share1

13,000,000 13,000,000 13,000,000 13,000,000

No diluted earnings per share have been presented because no dilutive potential ordinary shares existed

during the Periods.

1 The number of shares in the first nine months of 2015 was not equal to 13,000,000 due to the purpose of

basic earnings per share.

16. INVENTORIES

As at 31 December As at 30 September

2014 2015

kEUR kEUR

Raw materials and consumables 3,413 4,034

Work in progress 5,416 10,601

Finished goods 348 1,968

9,177 16,602

1-3Q 2014 1-3Q 2014

‘000 EUR ‘000 EUR

Basic earnings per share

From continuing operations 0.74 1.27

Total basic earnings per share 0.74 1.27


22

17. FINANCIAL ASSETS AND LIABILITIES

Financial assets


2014 2015

kEUR kEUR

Trade and other receivables (Note 21) 13,349 13,726

Bank balances and cash (Note 22) 13,150 20,839

26,499 34,565

Financial liabilities measured at amortized cost


2014 2015

kEUR kEUR

Current

Trade and other payables (Note 23) 3,432 6 512

Advance from customers (Note 25) 2,283 2,881

Related parties payables (Note 24) 634 665

Bank borrowings (Note 26) - 0

6,349 10,058

The carrying amounts of the financial assets and liabilities approximate to their fair values.

18. TRADE AND OTHER RECEIVABLES


2014 2015

kEUR kEUR

Trade receivables 13,155 13,606

Other receivables 194 338

Subtotal financial assets 13,349 13,944

Prepayments 191 211

13,540 14,155


23

21. TRADE AND OTHER RECEIVABLES-continued

Trade and other receivables are denominated in the following currencies:


2014 2015

kEUR kEUR

Renminbi (“RMB”) 12,218 12,221

United States Dollars (“USD”) 1,322 1,934

Euros (“EUR”) - -

10,204 14,155

The fair value of trade and other receivables have not been disclosed as, due to their short duration,

management considers the carrying amounts recognized in the consolidated statements of financial

position to be reasonable approximation of their fair values.

Before accepting any new customer, the Group assesses the potential customer's credit quality and

defined credit limits by customer. Limits attributed to customers are reviewed once a year. The aging

analysis of trade and receivables is as follows:


2014 2015

kEUR kEUR

Current 13,120 12,876

The Group allows an average credit period of 60 days to its trade customers. The aging

analysis of trade receivables which are past due but not impaired is as follows:


2013 2015

kEUR kEUR

Past due for less than 3 months 35- 730

Past due for over 3 months

but less than 9 months - -

- -

13,155 13,606

There are no trade receivables that are past due and impaired.


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22. BANK BALANCES AND CASH


2014 2015

kEUR kEUR

Cash on hand 2 6

Bank balances 13,148 20 833

13,150 20 839

Bank balances and cash are denominated in the following currencies:


2013 2015

kEUR kEUR

Renminbi (“RMB”) 13,098 20,704

United States Dollars (“USD”) 9 89

Hong Kong Dollars (“HKD”) 4 4

Euros (“EUR”) 39 41

Zlotys (“PLN”) * *

11,983 20,839

* Amount less than EUR 1,000.

Bank balances and cash comprise cash held by the Group and short-term deposits with an original

maturity of three months or less. Bank balances as at 30 September 2015 carry interest at market rates

which ranged from 0.35% to 0.5% (2014: 0.35%-0.50%) per annum.

23. TRADE AND OTHER PAYABLES


2014 2015

kEUR kEUR

Trade payables 2,492 3,473

Other payables 11 1,601

Salary payables 929 1,066

Subtotal financial liabilities 3,432 6,140

Tax payables other than income tax 656 372

4,088 6,512

Trade and other payables are only denominated by Renminbi ("RMB").

The fair value of trade and other payables have not been disclosed as, due to their short duration,

management considers the carrying amounts recognized in the consolidated statements of financial

position to be reasonable approximation of their fair values.


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23. TRADE AND OTHER PAYABLES-continued

Trade payables comprise amounts outstanding for trade purchase. The average credit period is 30 days

from the time when the services are rendered by or goods received from suppliers. The aging analysis

of trade payables is as follows:


2014 2015

kEUR kEUR

Current 2,492 3,473

24. RELATED PARTIES PAYABLES

(1) Nature of relationship with related parties:

Name Relationship with the Group

Xie Qiulin Director of the Group

(2) Significant balances between the Group and the above related parties:


2014 2015

kEUR kEUR

Xie Qiulin 634 665

634 665

The amount due to Xie Qiulin was unsecured, non-interest bearing and payable on demand.

25. ADVANCE FROM CUSTOMERS

Advance from customers comprise down payment received for trade sales.

Advance from customers are denominated in the following currencies:


2014 2015

kEUR kEUR

Renminbi (“RMB”) 2,283 1,079

United States Dollars (“USD”) 1,802

2,283 2,881


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25. ADVANCE FROM CUSTOMERS-continued

The aging analysis of advance from customers is as follows:


2014 2014

kEUR kEUR

Less than 3 months 1,089 909

Over 3 months but less than 1 year 882 1,812

Over 1 year but less than 1 and a half years 312 159

2,283 2,880

26. BANK BORROWINGS


2014 2015

kEUR kEUR

Secured bank borrowings -- -

Carrying amount repayable

within 1 year -- -

27. SHARE / PAID-IN CAPITAL

The share / paid-in capital shown in the consolidated statements of financial position is as follows:


2014 2015

kEUR kEUR

Share/paid-in capital 13,000 13,000

The details of the Company's share capital are as follows:

Numbers of Share capital

shares EUR

Authorized and issued and fully paid

Ordinary shares of EUR1.00

each on the date of incorporation,

at 30 September 2015 13,000,000 13,000,000

28. RESERVES

Share premium


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Share premium is non-distributable other than in liquidation and may be utilized for business

expansion or converted into ordinary shares by the issuance of new shares to shareholders in

proportion to their existing shareholdings or by increasing the par value of the shares currently held by

the shareholders.

Statutory surplus reserve

As stipulated by the relevant laws and regulations applicable to China’s foreign investment

enterprises, the Company’s PRC subsidiaries are required to maintain a statutory surplus reserve

which is non-distributable. Appropriations to such reserve are made out of net profit after tax of the

statutory financial statements of the PRC subsidiaries at the amounts determined by their respective

boards of directors annually up to 50% of paid-in capital, but must not be less than 10% of the net

profit after tax.

The statutory surplus reserve can be used for making up losses of the group entities in China

Mainland, if any. The statutory surplus reserve may also be used to increase capital or to meet

unexpected or future losses. The statutory surplus reserve is non-distributable other than upon

liquidation. Therefore the Company recognized the statutory surplus reserve as a legal reserve

following Dutch regulation article 389.6 BW2.

The statutory surplus reserve of the Group amounts to kEUR 2,637 at 30 September 2015 (31

December 2014: kEUR 2,637). The statutory surplus reserve of the Group is related to Fujian Peixin

and Quanzhou Peixin.

28. RESERVES-continued

Retained profits

The retained profits comprise the cumulative net gains and losses recognized in the Company's income

statement.

Foreign currency translation reserve (other comprehensive income)

Foreign currency translation reserve represents the foreign currency translation difference arising from

the translation of the financial statements of companies within the Group from their functional

currency to the Group's presentation currency.


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29. RELATED PARTY TRANSACTIONS

Compensation to director of the Company

Note 24

No Personal undertaking loans guaranteed by director of the Company as of 30 September 2015

Personal undertaking loans guaranteed by director of the Company

30. CONTINGENCIES

As at 30 September 2015, the Group had no contingencies that needed to be disclosed.

31. COMMITMENTS

As at 30 September 2015, the Group had no commitments that needed to be disclosed.

32. EVENT AFTER THE REPORTING PERIOD

There are no further significant non-adjusting events or any significant adjusting events to report

between the reporting date and the date of preparation of these financial statements.


The interim consolidated financial statements on page A to D as well as selected explanatory notes on

page 1 to 29 were approved and authorized for issue by the Board of Directors on November 19, 2015 and

are signed on its behalf by:

Xie Qiulin Huang Zhimin

DIRECTOR DIRECTOR

Xie Kaida Bas Xue

DIRECTOR DIRECTOR

Li Ya Shen Ming

MEMBER OF THE SUPERVISORY BOARD MEMBER OF THE SUPERVISORY BOARD

Liem Tsong Lucien Tjon Du Zhanghe

MEMBER OF THE SUPERVISORY BOARD MEMBER OF THE SUPERVISORY BOARD

Wu Rongfu

MEMBER OF THE SUPERVISORY BOARD

Consolidated Financial Report of PEIXIN International ... · Full-servo Control Elastic Laminited...

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